President Obama's Loan Modification Program - Could it Save Your Home?


President Obama has signed a stimulus bill allocating 75 billion dollars to help stimulate the housing market and stop the flood of foreclosures. This help comes in the form of loan modification.

The United States is experiencing an economic downturn that is impacting all segments of the economy. The soaring unemployment rates have fueled the housing market's decline. People who have lost jobs have rarely been able to find employment in the same salary range. This causes their house payment, while once achievable, to be almost impossible! This is a bona fide case of financial hardship, one of the requirements to apply for a reworked mortgage under this program.

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President Obama's stimulus package provides incentives for approved lenders, $1000 to be exact, for every existing loan that they rewrite for qualified homeowners. These new loans will have a lower monthly payment, hopefully allowing the successful fulfillment of the loan obligation and keeping the families in their homes.

When the banks rework these loans, they have several tools at their disposal. They can use any or all of them necessary to get the house payment below 31% of their monthly gross income. This house payment figure also includes property taxes, insurance, and any dues the homeowner is responsible for in a homeowner's association. The interest rate can be reduced to as low as 2%, the loan term can be lengthened to as long as 40 years, late fees can be forgiven, and principal can be reduced.

The home must be a primary dwelling, and the loan has to be backed by Fannie Mae or Freddie Mac. It has to have been originated on or before January 1, 2009 and the amount not exceed $729,750. The unaffordable payment must be more than 31% of their gross monthly income.

The most critical part of the qualifications for a loan modification involves documenting your financial hardship. This could be job loss, as we said, or divorce, death of a spouse, medical bills, or military service. You must include all appropriate paperwork.

You must also present to the lender how you intend to make your new, modified monthly payment. Again, complete documentation is required.


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